BROWN&BROWN, PLC

REAL

ESTATE

Introduction:

The basic concepts of real estate law in Michigan come out of the English common law. Therefore, certain aspects of transactions from hundreds of years ago can be recognized today. Real estate transactions are also among the most complex matters a lawyer can handle. A real estate transaction may include any number of securities, tax, environmental, trademark, licensing, franchising, brokerage, and lending issues. The purchase price may be cash or may involve a 1031 exchange or reverse Starker exchange, or it may involve various levels of financing, including bonds, public incentives, environmental grants, conduit loans, or mezzanine financing, and indeed be totally controlled by the requirements for the sale of the loan on the secondary market.

Common Real Estate Documents:

1) Deeds – A deed is a written document that describes the premises, the seller, and the buyer and states the act and the date of conveyance.  These basic requirements probably convey the premises. The wording of a deed has important legal significance and, given the importance of the transaction, legal assistance in drafting a document can avoid significant legal problems.  A comprehensive document is preferred. At a minimum, the document should be recordable so the parties can give public notice of the transaction. (Institute of Continuing Legal Education; Real property).  The most common deeds are:

a) A warranty deed uses the word warrants in stating the act of conveyance. Unless exceptions are listed in the document, the seller warrants to the buyer that the interest that the buyer is receiving is fully vested in the seller and that there are no exceptions to clear fee title.  McCausey v Ireland , 253 Mich App 703, 660 NW2d 337 (2002).

b) A quitclaim deed conveys to the buyer only the interest in the premises that the seller actually holds, if any.

c) A limited warranty deed is occasionally used to provide a reduced warranty of title. The warranty given varies with the situation. An example is the deed given by a land contract seller on receipt of the final payment under a land contract.

d) A fiduciary deed is a deed received from a person who holds title only in a representative capacity. A fiduciary deed is common when the grantor is the trustee of a living or a testamentary trust, the personal representative of an estate, or a conservator.

2) Purchase Agreements – Purchase agreements are not true conveyancing documents; they are agreements to complete a transaction, at the close of which a conveyancing document is given.  However, a purchase agreement is a contract. Contracts for the sale of land inMichigan must be in writing or they are unenforceable because they violate the Michigan Statute of Frauds.

My property professor from law school used to say that have a lawyer help you with the purchase agreement and you can bring a monkey to the closing!  While I do not agree in full with that philosophy, it emphasizes the importance of the concept that the purchase agreement (contract for the sale of land) is the blueprint for the transaction.  For example, it may be very important to make the sale contingent upon Seller closing on the home he is purchasing.  The seller may also wish to limit liability for the condition of the property by having an “as is” clause.  Having an “as is” clause disclaims any warranties or representations regarding the condition of the property.

The purchaser may wish to make the sale contingent upon obtaining financing.  If the purchaser cannot obtain financing, the typical clause would cause the sale to be void and purchaser would then be entitled to return of his purchase deposit.  In addition, the purchaser may wish to make the sale contingent upon having the property inspected and being reasonably satisfied with the inspection.

The above items do not represent all the considerations regarding purchase agreements.  There are many more aspects to consider.

3) Land Contracts – A land contract is, in essence, an installment contract to buy land.  Title to the property remains vested in the Seller, subject to the equitable title of the person buying on land contract (equitable title).  The person buying on land contract is generally entitled to possession of the property and enjoys most benefits of home ownership.  This type of transaction is popular in situations where the buyer is unable to obtain a mortgage to pay the full price at closing.  There are many potential pitfalls with land contracts.  For example, a seller may still have a mortgage on the property.  The person buying on land contract could have significant legal problems should the seller default on his or her mortgage.  The mortgage lien of seller would generally be a first lien and therefore, the land contracts are subject to that lien.

From a seller’s standpoint, he or she stands in the shoes of a lender who must police the contract.  For example, in most land contracts, the buyer must pay the land contract payment, insurance (insuring both the seller and their interests), taxes and special assessments on the property.  The seller must watch the situation closely and enforce his or her rights when buyer defaults on his or her obligations.  Enforcing the seller’s rights requires sending buyer a notice of default.  Generally speaking, under Michigan law, a seller may file suit in either district court or circuit court to enforce a land contract.  Actions in district court are less expensive and faster; however, a defaulting buyer may cure the default by paying the back payments owed.  In a circuit court action, the default must have been for 45 or more days and, the Seller may accelerate the entire balance of the land contract.

4) Boundary line disputes, prescriptive easements and adverse possession – when purchasing property, it is well advised to have the property surveyed.  At a minimum the boundary stakes should be located.  Very often, a fence, a building or other structure may be placed on or over the property line.  This is an encroachment.  If the encroachment is left in place for a period of over 15 years, the person who is encroaching may gain title (through adverse possession).  By getting a survey, one can determine if an encroachment exists and usually can determine the length of time it has been in place.

Another common issue with landowners is an easement.  An easement is a legal right to access of a property by another.  Often, utility companies obtain easements for power lines, sewer lines, etc.  A prescriptive easement is a property right that accrues much like adverse possession.  For example, an alley in the rear of a property may have been used openly, notoriously and hostily for a period of over 15 years.  If so, those using the alley are said to have obtained a prescriptive easement.

5) Brown and Brown, PLC and Property – Our firm has been handling real estate matters for over 25 years.  We have assisted buyers and sellers in the many issues that arise in the sale of commercial and residential real estate.  We are available both on line (at reduced rates) and in person to assist clients in all aspects of real property transactions.   We can represent sellers in “for sale by owner” transactions at a fraction of the cost of real estate brokers and can much better protect persons since we are licensed attorneys.

a) Preparation of real estate documents – Brown and Brown, PLC can draft deeds, land contracts, mortgages, commercial and residential leases, purchase agreements, bills of sale for personal property in connection with the sale of real estate, and long list of other real estate documents.

b) Litigation – Our firm has extensive experience handling litigation in the following areas:

i) landlord tenant eviction

ii) land contract litigation in district and circuit court

iii) boundary line disputes

iv) property defect lawsuits

v) lien law disputes

vi) specific performance cases (cases involving a lawsuit compelling the sale of land)

vii) lease litigation and collection of rent and damages

Please feel free to email or call Brown and Brown, PLC for a free consultation regarding your legal issues involving property.

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attorneys and counselors at law